Home Equity Loan – An Alternative For Our Urgent Needs


Owing a house is of great help in our lives as it is not only an addition to our asset book but also a superb option for financing our needs at odd hours. Many times in our lives we come across situations when we require funds but it is just not an easy task to arrange credit for these times. So, home equity loans are the best option under such situations. They are a flexible option to cater to all our financial needs.Home equity loan is a loan that is taken by the borrower by keeping the equity in his home as collateral. Equity is the difference between the price that your house is worth and the amount which you owe on it. By keeping the home as collateral, one can easily avail a home equity loan and even the lender does not hesitate in lending in type of loan as they are secured in nature. He just demands collateral for the loan and in case if the borrower fails to repay the loan amount, lender can sell the collateral at his possession to recover the loan.The borrower can only avail a loan that equals his equity. No lender extends credit more than the equity amount and this makes him quiet safe against default since the loan amount can be easily recovered.There are two types of home equity loans- the standard Home Equity Loans and the home equity line of credit.Standard home equity loans are extended at a fixed rate of interest and payments. Under this category, the loan amount is given in lump-sum and the interest rate is charged from the time, the loan is extended. On the other hand, there are home equity lines of credit whereby the borrower is extended credit in installments. The borrower is issued a cheque book or credit card in this case and he can borrow a certain amount whenever he wants rather taking a lump-sum amount. The interest rate is charged only when the borrower withdrew money. Also the borrower is charged a flexible home loan rates under this category.These home loans in India are offered at low interest rates as they are risk-free and the loan amount extended is eligible for certain tax deductions. This factor makes them very attractive as other kinds of loans do not offer this benefit. Even the bad credit borrowers are extended these loans because of their risk free nature.Today home equity loans are provided by almost all banks and financial institutions. A borrower can avail this loan for a variety of options ranging from reconstruction of home, pursuing of higher education, to clear medical bills and even consolidate debt. This is the best option to fund our urgent needs.